Open for business

Landmark Shanghai import expo shows how China wants to buy what the world has to offer

Some 300,000 visitors are expected in Shanghai for the inaugural China International Import Expo, one of the major flagship events to be held in China this year.

More than 2,800 companies from 130 countries, including 200 companies on the Fortune Global 500 list, will participate in the sixday event, which begins on Nov 5.

The expo, which will be held annually, is set to demonstrate clearly to an international audience that China's economy is no longer just the manufacturing powerhouse of recent years, but one driven by consumers who want to buy what the world has to offer.

Signs promote the upcoming China International Import Expo in Pudong New Area, Shanghai, on Oct 11. Zhou Dongchao / For China Daily

Against a background of increasing international trade tensions, the expo is also intended to demonstrate that China is open for business as the country marks the 40th anniversary of reform and opening-up.

Sherri He, a partner at management consulting firm A.T. Kearney's Shanghai office, says it is probably the biggest import-related event of all time.

She says it is on a much bigger scale than the Canton Fair, the biannual event that has been held in Guangzhou, Guangdong province, since 1957.

"That would be a comparison point, but that is for both imports and exports. This is probably the first-ever global import event," she says.

The exhibitors will include a wide range of companies, from those demonstrating their expertise in high-end technologies such as industrial robots, machine tools, artificial intelligence and advanced healthcare, to those selling food items and luxury consumer goods.

For some, the main goal will be to get up close to the Chinese middle class consumer, whose growing numbers are set to be one of the global economic megatrends of the coming decades. According to McKinsey & Co, China's middle class could increase to 630 million by 2022, almost double the current US population of 327 million.

One high-profile exhibitor will be German carmaker BMW. It reconfirmed its commitment to the Chinese market by announcing in October that it would pay 3.6 billion euros ($4.1 billion; ￡3.2 billion) to take majority control of its joint venture with Brilliance China Automotive Holdings. The company was taking advantage of new rules, announced by President Xi Jinping at the Boao Forum in Hainan province in April, to open up China's automotive sector to foreign players.

Jochen Goller, president and CEO of BMW Group Region China, says one of the purposes of the expo is to highlight the "upgrading needs" of the Chinese consumer, which he hopes his company will meet with its leading position in autonomous driving and electric cars.

"(This) greatly resonates with the core purpose of CIIE. We believe the expo is a platform to demonstrate our long-term commitment as well as our confidence to grow with China."

However, those exhibiting at the expo will find that the Chinese consumer market, although potentially lucrative, is not easy to crack.

Alina Ma, associate research director in Shanghai for Mintel, a market research company, says that simply being foreign is no longer such an allure to the Chinese consumer.

"This may have been the case 10 years ago, but no longer. Chinese consumers have now traveled abroad and have a lot of experience. They are particularly savvy when it comes to buying online," she says.

"They like to compare and contrast product features, and they often find that Chinese products offer what they need and are value for money."

Ma says an increasing trend is for Chinese consumers to desire products that have a Chinese heritage or value.

"This applies to younger consumers as much as older ones and poses another challenge for foreign companies."

Mats Harborn, president of the EU Chamber of Commerce in China, whose Shanghai chapter was to release its own position paper on the expo on Nov 2, says 60 percent of its members thought Chinese products were now as innovative as their own products, or more so.

"It is a signal I want companies to send back to their headquarters. They need to wake up and put their resources in China," he says.

China's imports are an important driver of the global economy, with the world's second-largest economy also being the second-largest importer of goods for nine consecutive years, making up 10.2 percent of global imports in 2017, according to Chinese government data.

China's imports of goods rose to $1.74 trillion in 2017, up by 16 percent year-on-year, whereas its exports rose by only 11.4 percent to $2.216 trillion.

Louis Kuijs, head of Asia economics for consultancy Oxford Economics, says the rebalancing toward consumption and away from exports is one of the most important global economic trends.

"Domestic demand in China continues to grow faster than the rest of the world, which means imports are going to be increasingly pulled in by China," he says.

Kuijs says that despite the rhetoric coming from the administration of US President Donald Trump about China's trade surplus with the United States, its surplus with the rest of the world is actually disappearing.

He is forecasting that the current account surplus of 1.3 percent of GDP last year will fall to just 0.1 percent this year and may soon become a deficit.

"If it happens, it will be a milestone and a lot will be written about it. China has a deficit with economies and countries like Malaysia, which are part of China's Asian supply chain involving the import of large volumes of components. It also imports raw materials from countries like Australia. Increasing imports will mean that its current overall surplus will disappear."

The expo is taking place as China marks the 40th anniversary of reform and opening-up.

Leon Wang, executive vice-president for international and China president at AstraZeneca, the UK-based pharmaceuticals multinational, which will be an exhibitor, says the anniversary gives the expo added significance.

"At a time when China is celebrating its 40th anniversary of reform and opening-up, it is of greater significance for the country to host this international event in Shanghai. It shows not only the rise of China under this policy, but also presents a national image that it is open, inclusive and reciprocal."

China is the company's biggest market after the US, and Wang says rising incomes are leading the country's middle class, in particular, to demand better healthcare.

"With higher economic growth and personal incomes, people are demanding more and better healthcare. The needs of precise, personalized and smart treatment with affordable and accessible healthcare services are increasing," he says.

"We have delved deep into the Chinese market and are increasing investment. (We are) focusing on therapy areas where Chinese patients have the most urgent demand," he says.

The expo is also likely to demonstrate how imports are important in driving China's own industrial modernization. China wants to make advances, in particular, in advanced manufacturing, robotics and artificial intelligence.

Denis Depoux, CEO of Greater China for management consultants Roland Berger, says advances in technology generally require a collaborative effort.

"Imports make sense from a multiple standpoint, but one of the most underlying is their role in the modernization of the Chinese industrial footprint in terms of technology transfers and in other respects."

Depoux, who is also deputy head of Asia for the consultancy, says China needs imports to fill gaps in its own technology deficits, despite its ambitious overall plans.

"You can decide overnight that you want to be a producer of aircraft engines or gas turbines, but from that moment to actually achieving it could have a lead time of 20 to 30 years. In the meantime, China, like many other nations, will keep importing these high-end products."

Mary Ma, secretary-general in Shanghai for the Center for China and Globalization, an independent think tank, believes the expo is worthy of being compared to London's 19th-century Great Exhibition and is a major opportunity for importers to showcase their products.

"Many have said it provides a 6-plus-365 opportunity - you exhibit at the show for six days and then you can sell online for 365 days. This is particularly the case with Nov 11 (Singles Day, when online goods are heavily discounted) coming up," she says.

Ma, who returned to China last year after working in Chicago on export promotion to China for the International Trade Center of Illinois, says the purchasing power of younger people in China is something of a phenomenon.

"The one thing I noticed when I came back was the numbers of 20-to 30-year-olds in the shopping malls of Shanghai and Beijing. This is a huge market, and I am not sure if the foreign brands do the best to reach it, particularly online."

Joseph Healy, CEO of Judo Capital, a specialist lender based in Melbourne, Australia and author of Chinese Firms Going Global: Can They Succeed?, says the changing nature of China's imports is beginning to have an effect on traditional resource exporters like Australia.

"It used to be just an exporter of raw materials, but that is shifting. China's growing middle class is a wonderful opportunity for Australia and New Zealand's dairy products, wines and other products," he says.

"On a political level, however, Australia has been pathetic in terms of engaging with this opportunity and has come across at times as quite disrespectful."

Depoux at Roland Berger believes the expo will be a major opportunity for countries along the routes of the China-proposed Belt and Road Initiative that have not exported to China before.

"I am thinking, in particular, of Central Asia and agricultural exports, but this might also be an opportunity for some African and South American countries to try and establish a market position in China," he says.

He adds, however, that while it is a market of huge potential, it also has its own unique challenges.

"It is a very complex, fragmented and very fast-moving market. It often changes so fast that by the time you are thinking about moving in, it has changed again."

Against a background of escalating trade tensions, many of those taking part hope the expo will demonstrate the importance of open trade.

Wang at AstraZeneca is confident the expo will send an important signal.

"We greatly admire the foresight of the Chinese leadership in uniting the world ever more closely by hosting such an international event. China is an important engine for global economic growth and prosperity, and I am pleased the Chinese government supports globalization and free trade," he says.

Wang Huiyao, president and founder of the Center for China and Globalization, agrees that the expo is a major opportunity for companies around the world.

"China wants to buy more. It doesn't want a trade surplus," he says. "This event is very significant and represents a major shopping opportunity."

andrewmoody@chinadaily.com.cn

Containers are loaded onto a ship at Lianyungang Port in Jiangsu province. Wang Chun / For China Daily

( China Daily European Weekly 11/02/2018 page1)